Originally Posted by
DownUnderFlyer
But this is kind of the problem for LH. All their competitors offer a lower density and a lower price. With LHs production cost they need more density and a higher price to be profitable. If LH would just introduce a similar hard product they would get into real trouble as they couldn't get the revenue to make up for the extra cost.
Bottom line: They get squeezed on the cost side. Asian carriers take some of that cost advantage and translate it into a better product and some into lower fares. The perfect storm for LH.
I am still quite stuck to understand how Air France, Iberia, British Airways, Cathay Pacific, Thai Airways, Turkish Airlines, Emirates, Qatar, and KLM can have a siginficantly lower cost structure than Lufthansa Group.
The economist had an excellent piece about a year ago on airline cost structures, and it did not appear in any way that the gulf carriers had some special advantage as is routinely discussed.
Presumably, if the cost advantage was so great, Lufthansa could also open up a carrier in a country with lower costs and operate from there under a name which is similar however different- "Lufthansa Asia" anyone?
If Qantas can open up serveral companies as airlines in Singapore, Hong Kong, Vietnam, etc- is there a reason Lufthansa cannot as well? If the cost savings are so great as continually claimed why not do so?
Also- how does BA manage to update its fleet to fully flat in business without creating the type of shareholder dissent discussed on this board? Surely the challenges must be similar or is there something that is missing?
Lastly- the very comment that EK is flying 4 times a day to Bangkok seems to suggest there is a market- and it seems strange that all 1200-1500 customers a day are price sensitive. Do they only fill business and first through complimentary upgrades and staff tickets? Flying EK out of BKK- First has been full and I have seen upgrades declined.
Perhaps there are some customers that feel that death by a thousand paper cuts model of Lufthansa together with ever-increasing restrictions and a distinctly diminishing frequent flyer program is hardly the perfect strategic mix to emphasize premium travel.